How Value-Based Payment Is Changing American Medicine


An interesting thing happened to our healthcare system when Congress passed the Affordable Care Act back in 2010. We went from assuming the fee-for-service model was the best model to seriously considering switching to a value-based payment model instead. Value-based payment (VPB) is now preferred because it ostensibly puts the healthcare consumer in the driver’s seat.

Whether or not VPB actually works to improve the quality of care is still being debated. What cannot be denied are the changes that have been wrought within the medical field as a direct result of this new way of doing things. VPB has definitely changed the way American medicine functions.

More Hospital-Owned Groups

For starters, the transition to VPB has led directly to an increase in hospital-owned medical groups. The trend among hospitals to buy up independent practices began in earnest a few years before the Affordable Care Act, but it has been accelerated drastically in the last 6 to 7 years.

According to recently released data from the Physician Advocacy Institute, the U.S. saw a 100% increase in the number of hospital-owned physician practices during the four years ending July 2016. Along with that increase was a commensurate increase in the number of physicians employed by hospitals. Over that same four-year stretch, hospital employment increased some 63%.

It turns out that the VPB system financially favors larger healthcare systems. The bigger the system, the greater the advantage. So it’s in the best interests of healthcare systems to buy up private practices. Some systems are even starting new practices and recruiting young doctors to join them.

More Employed Doctors

The second way VPB is changing American medicine is a direct offshoot of the first. More and more doctors, especially the younger ones, are finding it more attractive to go work for a hospital or a hospital-based group rather than owning a practice. To say that independence has lost its luster among medical professionals is to state the obvious.

The loss of private practice in favor of hospital employment is so pervasive that, according to Healthcare Dive, the Kentucky Medical Association has replaced its seminar for young doctors looking to establish their own practices with a new seminar to educate them about employment contracting and financial management.

Doctors Are Not Sold

The most fascinating aspect in all of this is found in the attitudes of the doctors themselves. Despite physicians being generally more accepting of hospital or hospital group employment, they are not sold on the idea that VPB is actually a good thing. They are not convinced it improves quality of care.

A study released by Leavitt Partners this past January (2018) shows that just 22% of America’s doctors think the VPB model will lower healthcare spending. Just 21% believe bundled payments will drive down costs while only 29% think that the VPB model will actually improve patient outcomes.

In short, doctors are taking advantage of the VPB model for employment because it benefits them. The VPB model allows them to practice medicine while leaving the business side of the industry to the employer. It is far more attractive to a lot of doctors than opening their own practices, a task that requires them to simultaneously treat patients and run a small business.

Meanwhile, the vast majority of those same doctors don’t believe that the new employment model will actually improve medical care. Theirs is a true dichotomy brought about by a legislative package that was intended to make healthcare delivery better for everyone involved. It’s interesting how things have changed since 2010, isn’t it?

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